Microsoft drops observer seat on OpenAI board that sparked scrutiny

Microsoft resigned on Tuesday from its observer role on OpenAI’s board amid heightened scrutiny from U.S. and European antitrust regulators of the partnership between the two tech giants.

Microsoft sent a letter Tuesday to the artificial intelligence (AI) company, which makes ChatGPT, saying it would give up the observer seat “effective immediately.”

“We appreciate the support shown by OpenAI leadership and the OpenAI board as we made this decision,” Microsoft said in its letter.

Microsoft said its presence was no longer needed on the board since, the company assessed, OpenAI’s governance had much improved since the chaotic boardroom turnover last year.

After OpenAI CEO Sam Altman was ousted by board members last year, Microsoft helped orchestrate a comeback that reinstated Altman as chief executive, forced out board members who opposed him and gave Microsoft an observer seat.

“Over the past eight months we have witnessed significant progress by the newly formed board and are confident in the company’s direction,” Microsoft said in the letter. “Given all of this we no longer believe our limited role as an observer is necessary.”

The surprise resignation comes as regulators increase their efforts to crackdown on the powerful partnership between the two AI companies. Microsoft reportedly invested $13 billion in Altman’s OpenAI, The Associated Press reported.

Antitrust regulators at the U.S. Federal Trade Commission (FTC) are investigating OpenAI and Microsoft over their role in the rapidly growing AI industry.

The Biden administration has pushed for greater regulation of the AI industry, wary that top tech companies could quickly gain a stranglehold over the developing technology.

The FTC previously launched a similar investigation into Microsoft, Amazon and Google’s investments in OpenAI and AI startup Anthropic in January.

FTC Chair Lina Khan said at the time that the agency would scrutinize deals that “enable dominant firms to exert undue influence or gain privileged access in ways that could undermine fair competition.”

The Associated Press contributed.